Thursday, February 4, 2010

Who Knew? Not Cooperating Costs A Lot Less!

I love the intertubes. ("Intertubes": What the former United States Senator Ted Stevens from Alaska calls the internet.) Since the late 90's, every-day people have been doing their business online. This puts everybodies' business ~ online.

Old newsletters become a snapshot of an organization's personality. Let's look at the Tennessee Real Estate News-Journal (an Official Publication of the Tennessee Real Estate Commission) ~ for instance:

In the Summer 2000 TREN-J, there is a very nice explanation of exactly what makes up a Vacation Lodging Service (VLS) license. An excerpt:
Both types of firms [real estate
offices and VLS licensed offices] are
subject to the same requirements
regarding handling of escrow
funds which include: proper and
timely deposit and disbursement
of all funds received by the VLS
firm, proper accounting procedures
to assure compliance with
TREC regulations, retention of
records, review of records by
TREC, and discipline when mishandling
or misrepresentation of
funds is determined.
Bill Stewart, the TREC Auditor, contributed to the Fall-Winter 2001 edition with "Primer on Escrow Accounts" and includes a distinct paragraph relating to vacation rental management companies:
For vacation lodging operations,
all funds received for a
customer to reserve or occupy a
rental unit must be deposited to
and maintained in the escrow
bank account until that customer
has checked out. Multiple units
and multiple reservations of
each unit at any point in time
make detailed records keeping
a necessity. Bank statement
reconciliation should be coordinated
with the accounting records
on which monthly reports to unit
owners are based. Reservation
deposits must be maintained in
the escrow account until they
become earned rental revenue.
Rental revenue due a unit owner
must remain in the escrow
account until properly paid to
that owner. Commissions or
expenses deducted from rental
revenue and due the firm must
be disbursed at least monthly.
Sales and hotel/motel taxes are
additional examples of amounts
that may be included in funding
requirements depending on firm
Very interesting! Thank you, Mr. Stewart!

Oh, yeah. I forgot to mention that the TREN-J, published about quarterly, always has a DISCIPLINARY ACTION section. Yup. Every issue. The DA section is what makes that publication the gossip rag of the industry.

Two very interesting disciplinary actions appear in the same issue as Mr. Stewart's escrow article. I would go so far as to say ~ dare i say ~ that these two companies were actually the INSPIRATION for what now feels like a lecture on escrow accounting from Mr. Stewart:
Lic. No. VLS254741
Pigeon Forge, TN
Following an audit of the firm where
a deficit in the escrow account was
found, Principal Broker Bradley K.
Walker agreed to the following: (1)
pay a civil penalty of $7000.00, (2)
have the firm be on probation for
one year, (3) fully fund the escrow
account, and (4) provide the
Commission with quarterly reconciliation
reports while on probation.
Lic. No. 255489
VLS Applicant
Sevierville, TN
The respondent, at the time of
audit, was found to have a
substantial escrow account deficit
and was also operating an unlicensed
branch office. For these
actions the respondent agreed to:
(1) pay a civil penalty of $11,100.00;
(2) fully fund the escrow account
and make restitution of all monies
due by 09-30-01; (3) be on
probation for a period of one year;
and (4) provide the Commission
reconciliation reports on a quarterly
basis while on probation.
Chad McCarter at Great Smokies Management Corporation (Echota) also received a fine and probation in that issue, but only to the tune of $3000 for his substantial escrow deficit. Otherwise, the rest of the hand-slappings for Tennessee licensees is pretty boring.

This DISCIPLINARY ACTION appeared in the July 2001 issue of TREN-J:
Lic. NO. F255329
Sevierville, TN
Principal Broker Chuck B.
McCarter agreed to pay a
$1000.00 civil penalty, be on
probation one year, provide the
Commission with quarterly reports
about the escrow account
and fully fund the escrow
account after an audit of the firm
revealed a deficit in the escrow
Fast forward from Fall 2001 ~ 4 or 5 months, to TREN-J VOLUME: 11 - SPRING 2002 - NUMBER: 3. If you go look at it, scroll down to the DISCIPLINARY ACTION section to see what i see:
Lic. No. FM 254925
Pigeon Forge, TN
Following an audit conducted by
Commission staff which noted a
deficit in the firm’s escrow account,
Principal Broker David B.
Myers agreed to the following:
Pay a civil penalty of $4,000.00,
have the firm placed on probation
for a one year period, fully
fund the escrow account by November
30, 2001, and provide
the Commission quarterly reconciliation
reports while on probation.
And, on the same page, this little gem:
Lic. No. FM 255738
Gatlinburg, TN
Principal Broker Ted L. Mullikin
agreed to pay a civil penalty of
$1,000.00 for refusal to provide
a Commission auditor access to
information required to complete
an audit and further for acting as
principal broker of the firm after
expiration of his license.
Here's what i read into this: 5 companies were fined $23,100 for allowing the Auditor in the door. One company, Mountain Rentals owned by Ted Mullikin of Gatlinburg, was fined $1,000 for not... OMG! This means crime pays in Tennessee.

Yes, it makes me mad at the fined offenders for disrespecting their escrow accounts. But it just doesn't seem fair that not complying with the Auditor's request for access to the books results in a much, much, much, much smaller fine.

And did you just ask yourself "Why didn't Ted get probation like the others?" I asked myself the same thing. For goodness sakes, Ted's hands were even dirtier because he was operating without a license. Was the $1,000 harsh (not) penalty he received punishment for ignoring his license or ignoring the Auditor?

With this kind of disparity, you can see the attitudes and conduct that led to the rules being changed in 2003 so that these poor rental companies don't have to be fined for driving Jags and Escalades and Mercedes, anymore (aw, the real estate agents don't get to cash in on the rule change that would let them pay for that stuff from their escrow accounts).